Preparing to Buy a Home for the First Time

• Seller: Current owner of the home

• Buyer: Person(s) who has an accepted offer on the seller’s home

• Listing Agent: Real estate agent who represents the home seller and looks out for their best interest

• Buyer’s Agent: Real estate agent who represents the home buyer and is their advocate

• Home Inspector: Licensed professional hired by a buyer to inspect the home they are buying and provide a report of any issues with the home.

• Mortgage Broker: A person who has been a mortgage loan officer for at least five years and has taken additional training and testing to qualify as a mortgage broker. Mortgage brokers are experts in the mortgage lending space, and they work with buyers to select a mortgage loan program that works best for the buyer. Mortgage brokers work with wholesale mortgage lenders to whom they broker a buyer’s mortgage loan. Mortgage brokers are personal mortgage shoppers looking for the best rates, terms, and lowest costs for their clients. A mortgage broker is the buyer's point of contact for the entire mortgage process. They collect information from buyers and work with the wholesale lender on behalf of the buyer to secure financing.

• Wholesale Lender: Wholesale mortgage lenders do not work directly with the public to obtain clients to originate mortgage loans. Wholesale lenders work with mortgage brokers who originate mortgage loans with them. Wholesale lenders offer lower rates and terms to mortgage brokers because they do not have huge overheads like mortgage banks and mortgage companies. This “reduced” cost is then passed down to the borrower working with a mortgage broker. The wholesale lender underwriters mortgage applications, funds those mortgages, and, in some cases, also services the mortgage after closing. 

• Escrow / Title Company: Depending on the state, the title and escrow company can be the same or different entities. The escrow company is the neutral 3rd party that collects all the documents from the seller, buyer, title insurer, real estate agents, homeowners’ association, mortgage broker, and wholesale lender to close the sale of the home. The title company researches the title of the home to ensure that all liens on the home will be cleared at closing and that the only lien on the property after closing will be the mortgage the buyer is obtaining to buy the home.

• Escrow Officer: The escrow officer works for the escrow company and oversees the transaction to purchase a home. They communicate with the buyer about the items needed to ensure the home's title is correct. They hold the buyer's earnest money deposit and closing funds in escrow until they sign the loan documents and the lender approves the closing. Once the lender sends the wire to the escrow officer, they record the deed removing the current owner from the title of the home and placing the buyer as the owner; they also record the deed of trust, which shows that the buyer has a mortgage on the home. They release the funds to the seller and all parties in the transaction who need to be paid for services concerning the sale of the home.

• Underwriter: The underwriter works for the wholesale lender to verify all the information about the buyer, their income, assets, and credit to ensure they meet the guidelines for the loan amount they need to buy a home. The underwriter also reviews the title report, appraisal, and other documents regarding the home to ensure that the home meets lending guidelines. The underwriter is the person who approves a mortgage loan application for the lender and makes the final decision for the loan to buy a home.

• Doc Drawer Funder: The person who prepares the paperwork for mortgage loan documents that the seller and buyer sign at closing. Depending on the lender, the doc drawer funder can be one person or two. A doc drawer funder works with the escrow officer to ensure that the property title is properly vested and that all parties agree on the amount needed from the buyer and the lender to close the sale. The doc drawer funder draws up the mortgage loan documents. They review the final signed package and send the wholesale lender’s funds to escrow for closing.

Notary: A notary is a public official who can witness and validate documents when signed. Most loan closing documents are signed in the presence of a notary because they can meet the buyer anywhere at any time, versus the buyer needing to go to the title company during business hours to sign loan documents.

There’s no one-size-fits-all approach to knowing if someone is ready to be a homeowner. When debating renting vs. buying, a person must consider their lifestyle and long-term goals. There are a few signs someone may be ready to purchase a home, including:

• Feeling financially stable

• Feeling ready to settle in a specific location

• Desiring more freedom for home renovations

• Wanting more space and privacy

• Reviewing your purchase agreement to update your mortgage loan application to reflect the terms of your offer, like purchase price, earnest money amount, down payment, loan amount, closing date, seller concessions, and any other terms of your purchase contract.

• Contacting the escrow company to request their fees and the needed documents for your loan, such as preliminary title report, tax certificate, estimated settlement statement, their errors and omissions insurance, wire instructions, licenses and homeowners’ association documents if applicable.

• Shopping for the best rates and terms for you and your new home!

• Complete the Uniform Residential Loan Application

  • The broker/lender will help the borrower fill this out. It includes the following:

    • Type and terms of the loan the borrower is applying form, property information, personal information, current and previous employment (most recent 2 years), income, assets and liabilities, declarations, details of the transaction, demographic

• Documents to Submit

  • Documents the borrower will need to provide include but are not limited to: 

    • Income

      • Most recent pay stubs

      • Most recent two years of tax documents

        • W-2 statements 

        • 1099 statements 

        • Federal tax return

          • Needed for borrowers who are self-employed or using passive income (such as child support/alimony, Social Security SSA/SSDI, etc.) to qualify.

    • Assets

      • Most recent 60 to 90 days of:

        • Checking and savings account statements

        • Retirement account statements

        • Money market accounts

      • Gift funds

        • Must be accompanied by a gift letter

To prepare to buy a first home, buyers should call a mortgage broker to determine what they need to do to buy a home. There are things a buyer might need to do or should not do, and a mortgage broker guides the buyer through the process, expediting the home-buying process.

Additionally, buyers should consider the following:

• Monitor their credit score through Credit Karma and Experian Boost.

• Put away their credit cards. Do not carry them regularly.

• Start a budget and stick to it.

• Discuss the budget with a spouse, partner, family, and others to ensure everyone understands and respects the budget.

• Put the budget in a place where everyone can see it. Start educating the family about money.

• Create a vision board for the new home and include everyone in the project. Put the board out where everyone can see it so they remember why there is a budget and why saving is more important than spending.

• Cut back on non-essential spending. Make coffee at home, bring lunch to work, and limit the household to one streaming service. Get everyone involved in this process. It is good to have a common goal and an accountability partner.

• Reward yourself with small treats for sticking to the budget.

When buying a home, most people benefit from the expert guidance of a real estate agent. Homebuying is a complex process; an agent’s support goes a long way to minimize the complications buyers may face. The buyer may think they will get a better deal if they go directly to the listing agent, but it may cost them more overall. The listing agent’s client is the seller, and they will always sway the deal in their client’s favor. The buyer is their secondary client, and they will not put the buyer's interest before the seller’s interest. A home buyer needs an expert buyer’s agent to fight for them.

Many loan programs can be tailored to fit a borrower’s needs and financial resources, including programs that require as little as 3% down.

Mortgage application documentation varies depending on the borrower’s loan application. Some standard documents are needed from everyone, and others are only for some borrowers. An experienced mortgage broker assures their client’s documentation is to move the home-buying process forward.

Although speaking with a mortgage broker is best, generally, all home buyers must provide the following documentation: 

• Identification: 

  • A valid, unexpired government-issued identification with your photo. This can be a state ID, driver’s license, or passport.

  • Social Security Card, if available

• Income 

  • Paystubs covering the most recent 30 days that include year-to-date income

  • W2s for the past two years for all jobs

  • Two years of federal income tax returns for self-employed applicants, both personal and business

• Assets: Most current two months or quarterly statements for all asset accounts.

  • Checking/Savings

  • Money Market /CDs

  • Investment/Stock accounts

  • Crypto accounts

  • Employee Stock accounts

  • 401K IRS or other retirement accounts

We recommend that buyers ask their mortgage broker for a referral to a buyer’s agent. The buyer should interview the real estate agent to make sure they are someone the buyer likes and trusts. This agent will work with the buyer for an extended period, and it’s important that the buyer can like and trust their agent.

While many people have their real estate agent's license, real estate may not be their full-time job, and that means that a buyer will only have a real estate agent when they are not doing their real job. Home buyers need a full-time real estate agent who only works with buyers and sellers.

What a buyer can afford, their credit status, and the cash available for a down payment determines the direction of the home-buying process. We recommend any prospective home buyer speak with a mortgage broker to determine how much home they can afford.